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Pointers in Taxation Law. Nov 2015docx
Pointers in Taxation Law. Nov 2015docx
Q. What is the distinction between the power to tax and the exercise of police power?
A. Chevron v. BCDA and CDC: When the purpose of the imposition of a royalty fee upon an oil
company is not for the purpose of generating revenue but a recognition that the oil industry is imbued
with public interest, then the royalty fee will be considered as a regulatory fee.
*Simply stated an imposition that is for revenue is generally a tax while an imposition that has another
purpose such as regulation is an exercise of police power.
The Constitution has delegated legislative power to the President to impose tariff rates, import and export
quotas, tonnage and wharfage dues and other duties or imposts within the framework of the national
development program.
Charitable institutions, churches and personages or convents appurtenant thereto, mosques, non-profit
cemeteries and all lands, buildings and improvements, actually, directly and exclusively (ADE) used for
religious, charitable or educational purposes are tax exempt.
ADE means solely used for the purposes enumerated in the Constitution.
Note also that it is the use of property that determines exemption not the use of income coming from
such property. (Lung Center of the Philippines v. Quezon City, 2004)
Any law granting tax exemption must be approved by majority of all members of Congress.
All money collected for a special purpose (special levy or tax as contrasted to general tax) shall be
dedicated only for that purpose and any excess shall be transferred to the general fund of the government.
All local government units may impose tolls (ex. use of roads), charges (ex. special assessment for certain
activities) and fees (ex. building permits, business permits) in line with the principle of local autonomy ;
except for non-payment of community taxes/poll taxes, non-payment of other taxes such as real property
taxes may subject one to imprisonment.
While taxes are not subject to set-off or compensation and over payment when proven forces the
government to restore to the taxpayer the amount it overpaid (solution indebiti).
Q. Can a non-profit, non-stock educational institution refuse to settle the assessment of a local
government for its building permit?
A. No. Angeles University Foundation v. City of Angeles: The DPWH implements the Building Code
through the Building Officials of all local government units. While there is incidental revenue to the local
government unit, the imposition of a Building Permit partakes of a regulatory nature. The imposition of
Building Permit fee is an exercise of police power to ensure compliance with the standards under the
Building Code to protect the public from any danger.
Q. When enacting tax measures, what general guidelines must the legislator consider?
A. In enacting tax measures the legislator must exert every effort to distribute the tax burden between
individuals or classes of population; in general, to redistribute resources between individuals (to include
some form subsidy by way of support to particular classes like the senior citizens, the poor, the retired
employees, the disabled); to provide basis for fiscal policy; to modify patterns of consumption or
employment (may have incentives or factors to make them less attractive).
Q. What are general characteristicsof tax measures?
A. Taxes are enforced and never voluntary (does not need consent of the taxpayer); exacted pursuant to
law (part of legislative power but limited by constitutional provisions; and must originate from the House
of Representatives); exaction is always in the form of money but failure to pay may result to distraint and
levy of properties; taxes are personal and cannot be transferred or transmitted but the burden can be
shifted (in case of indirect taxes like VAT), purpose is to raise revenue for public/ governmental purpose;
proceeds of tax collection cannot be used for private purpose; levied by authority which has jurisdiction
over the following person, property, transaction, rights and privileges (which is the extent of
coverage/scope of powers).
Q. Discuss the normal tax cycle.
A. The Tax Cycle:
Levy Congress determines the persons, property or exercises to be taxed, amount to be raised, rates to be
imposed and manner of implementation.
Assessment and Collection The executive branch administers and implements all tax laws; and enforces
the levy.
Payment and/or Exercise of Remedies Compliance results in payment but resistance will allow the
government and the taxpayer to exercise both administrative and judicial remedies.
Q. What is the purpose of tax?
A. Fiscal when it raises funds or regulatory which it seeks to achieve social or economic goals.
Q. Who are liable for tax?
A. For direct taxes, same person absorbs the tax (ex. income tax, PTR, CTC) and burden to pay cannot be
shifted while in indirect taxes, tax is paid by the person other than the one upon whom it is imposed, thus
the burden can be shifted (ex. VAT). (Expect questions on VAT-exempt transactions and VATable
transactions).
Q. What factors must be considered in imposing taxes?
A. Consider persons (natural and juridical) to be taxed; consider residence of the tax payer
(mobiliasequnturpersonam); consider threshold period and threshold amount; determine situs of the tax to
avoid double taxation; review reciprocity and comity principles under tax treaties which may operate for a
given tax incident.
Q. The employees of the Bureau of Customs assailed the constitutionality of the Attrition Law on
the following grounds: denial of due process, violative of the equal protection clause, undue
delegation of power, constitutes itself as a bill of attainder and threatens their security of tenure.
Will the case prosper?
A. BOCEA v. Sec. Teves: No. The Attrition Bill is constitutional. There is a valid classification not
violative of the equal protection clause as the employees of BIR and BOC, being involved in revenue
collection, are different from other government employees. The law does not violate due process and
security of tenure; it is also not a bill of attainder as the underperformance is indicated by a clear standard
expressly provided and dismissal is subject to civil service substantive and procedural rules.
Q. How are tax measures interpreted?
A. As a general rule, tax statutes are construed strictly against the government and liberally in favor of
taxpayers; under the lifeblood theory, it frowns against exemptions and there therefore the taxpayer has
the burden of proof to show his claim (strictissimi juris);tax amnesty is never presumed.
Miramar Fish Company, Inc. v Commissioner of Internal Revenue., G.R. No. 185432, June 4, 2014: A
claim for tax refund or credit, like a claim for tax refund exemption, is construed strictly against the
taxpayer. One of the conditions for a judicial claim of refund or credit under the VAT System is
compliance with the 120+30 day mandatory and jurisdictional periods.
CIR v. San Roque Power Corp and other consolidated cases, G.R No. 205543, June 30, 2014: The
general rule is that a void law or administrative act cannot be the source of legal rights or duties. Article 7
of the Civil Code enunciates this general rule, as well as its exception. The Court said that although
Section 4 of the 1997 Tax Code provides that the "power to interpret the provisions of this Code and other
tax laws shall be under the exclusive and original jurisdiction of the Commissioner, subject to review by
the Secretary of Finance," Section 7 of the same Code does not prohibit the delegation of such power.
Thus, "the Commissioner may delegate the powers vested in him under the pertinent provisions of this
Code to any or such subordinate officials with the rank equivalent to a division chief or higher, subject to
such limitations and restrictions as may be imposed under rules and regulations to be promulgated by the
Secretary of Finance, upon recommendation of the Commissioner."
The Court further held that provisions of the NIRC particularly Section 112(A) and (C) must be
interpreted according to its clear, plain, and unequivocal language. The taxpayer can file his
administrative claim for refund or credit within the two-year prescriptive period. If he files his claim
on the last day of the two-year prescriptive period, his claim is stillfiled on time. The Commissioner will
have 120 days from such filing to decide the claim. If the Commissioner decides the claim on the 120th
day, or does not decide it on that day, the taxpayer still has 30 days to file his judicial claim with the
CTA.
Q. May a private company refuse to grant a 20% senior for its services?
A. No. Manila Memorial Park, Inc and La Funeraria Paz-Sucat v. DSWD Secretary, 2013: The validity
of the 20% senior citizen discount and tax deduction scheme under RA 9257, as an exercise of police
power of the State, has already been settled in Carlos Superdrug Corporation. The discount given to
senior citizens meets all the requirements under the equal protection class. Senior citizens are
likewise exempt from 12% VAT imposition.
Q. What are the factors to consider in enacting revenue-raising measures?
A. Purpose is lawful, identify specific person, property or privilege to be taxed, specify schedule of the
rate to be imposed; distinguish if tax is direct or indirect; apportionment of the tax to be collected; situs of
taxation; and mode of levy/collection.
Q. What may be the subject matter of taxes?
A. Personal, capitation or poll fixed amount without regard to class;
Property subject to assessment based on area, location, use and normally distinguishes between land
and improvements which may include equipment;
Excise based on exercise of privileges or doing business (Expect questions on input/output tax and zero
rated transactions); and
Customs duties imposed on commodities exported or imported.
Q. May the provisions of a tax law be extended by implication?
A. Yes.CIR v. Ariete et al, 2010. It is well-settled that where the language of the law is clear and
unequivocal, it must be given its literal application and applied without interpretation. The general rule of
requiring adherence to the letter in construing statutes applies with particular strictness to tax laws and
provisions of a taxing act are not to be extended by implication. A careful reading of the RMOs pertaining
to the Voluntary Assessment Program (VAP) shows that the recording of the information in the Official
Registry Book of the BIR is a mandatory requirement before a taxpayer may be excluded from the
coverage of the VAP. .
Q. Is a claim for tax exemption tantamount to questioning the authority of the assessor?
A. No.Camp John Hay Dev. Corp. v. Central Board of Assessment Appeals (CBAA), 2013: The Court
held that a claim for tax exemption, whether full or partial, does not deal with the authority of
localassessor to assess real property tax. Such claim questions the correctness of the assessment and
compliance with the applicable provisions of Republic Act (RA) No. 7160 or the Local Government Code
(LGC) of 1991, particularly as to requirement of payment under protest, is mandatory.
Q. PEZA holds a special charter and created by law. The main objective of the law is to provide a
package of incentives to investors locating in areas identified as export processing zones. Through
the years, PEZA has established a number of these zones. May PEZA be taxed as a corporate body?
A. No.CITY OF LAPU-LAPU vs. PHILIPPINE ECONOMIC ZONE AUTHORITY; PROVINCE OF
BATAAN, REPRESENTED BY GOVERNOR ENRIQUE T. GARCIA, JR., AND EMERLINDA S.
TALENTO, IN HER CAPACITY AS PROVINCIAL TREASURER OF BATAAN vs. PHILIPPINE
ECONOMIC ZONE AUTHORITY, G.R No. 184203, G.R NO. 187583, November 26, 2014:Being an
instrumentality of the national government, the PEZA cannot be taxed by local government units.
Although a body corporate vested with some corporate powers, the PEZA is not a government-owned or
controlled corporation taxable for real property taxes. The PEZAs predecessor, the EPZA, it was declared
non-profit in character with all its revenues devoted for its development, improvement, and maintenance.
Consistent with this non- profit character, the EPZA was explicitly declared exempt from real property
taxes under its charter. Even the PEZAs lands and building whose beneficial use have been granted to
other persons may not be taxed with real property taxes. The PEZA may only lease its lands and buildings
to PEZA-registered economic zone enterprises and entities. These PEZA- registered enterprises and
entities, which operate within economic zones, are not subject to real property taxes.
prepared tobacco. Since the Tax Code contained no definition of partially prepared tobacco, then the
term should be construed in its general, ordinary, and comprehensive sense x xx. Finally, excise taxes are
essentially taxes on property because they are levied on certain specified goods or articles manufactured
or produced in the Philippines for domestic sale or consumption or for any other disposition, and on
goods imported. In this case, there is no double taxation in the prohibited sense despite the fact that
they are paying the specific tax on the raw material and on the finished product in which the raw
material was a part, because the specific tax is imposed by explicit provisions of the Tax Code on
two different articles or products: (1) on the stemmed leaf tobacco; and (2) on cigar or cigarette
Q. The City of Manila sought to enforce both Sections 14 and 21 of the Manila Revenue Code
claiming that the former is a tax on manufacturers, etc. while the latter applies to business subject
to excise, VAT or percentage tax. Will the imposition of both sections amount to invalid double
taxation?
A. Yes. There is in fact double taxation since both sections are being imposed on the same subject matter
(privilege of doing business within the city), for the same purpose, by the same taxing authority, within
the same taxing jurisdiction, for the same taxing period, and of the same kind or character (a local
business tax imposed on gross sales or receipts).
Q. Is an electronic message with instruction to debit an account and pay a person subject to DST?
A. No. THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED-PHILIPPINE
BRANCHES vs. COMMISSIONER OF INTERNAL REVENUE, G.R. No. 166018 & 167728, June 4,
2014:On review with the Supreme Court, it held that an electronic message containing instructions to
debit their respective local or foreign currency accounts in the Philippines and pay a certain named
recipient also residing in the Philippines is not transaction contemplated under Section 181 of the Tax
Code. They are also not bills of exchange due to their non-negotiability. Hence, they are not subject to
DST.
Q. What is the purpose of the requirement for printing of sales invoices and official receipts?
Silicon Valley, Phils., Inc. v. CIR, 2011. This Court reiterates that, the requirement of [printing] the BIR
permit to print on the face of the sales invoices and official receipts is a control mechanism adopted by
the Bureau of Internal Revenue to safeguard the interest of the government. Without producing the
Authority to Print, the taxpayer cannot claim any tax refund/tax credit.
Q. What are the requirements for a tax refund or tax credit?
A. CARGILL PHILIPPINES, INC vs. COMMISSIONER OF INTERNAL REVENUE, G.R. No.
203774, March 11, 2015: The Supreme Court reiterated that it is fatal if the taxpayer failed to print the
word zero-rated on the VAT invoices or official receipts in claims for a refund or credit of input VAT on
zero-rated sales, even if the claims were made prior to the effectivity of R.A 9337. A VAT invoice is the
sellers best proof of the sale of goods or services to the buyer, while a VAT receipt is the buyers best
evidence of the payment of goods or services received from the seller. The requirement of imprinting the
word zero-rated proceeds from the rule-making authority granted to the Secretary of Finance by the
NIRC for the efficient enforcement of the same Tax Code and its amendments. A VAT-registered person
whose sales are zero-rated or effectively zero-rated, Section 112(A) specifically provides for a two-year
prescriptive period after the close of the taxable quarter when the sales were made within which such
taxpayer may apply for the issuance of a tax credit certificate or refund of creditable input tax.
Q. May a claim of refund prosper if the VAT invoices do not indicate the transactions as zero-rated?
A. No. EASTERN TELECOMMUNICATIONS PHILIPPINES, INC., vs. COMMISSIONER OF
INTERNAL REVENUE, G.R. No. 183531, March 25, 2015:The Court stressed that the failure to
indicate the words zero-rated on the invoices and receipts issued by a taxpayer would result in the
denial of the claim for refund or tax credit.
Q. May the BIR impose conditions not included in a tax treaty for the application of tax relief?
A. No. Deutsche Bank v. CIR, 2013. A tax treaty is an agreement that provides for a uniform treatment
of a taxable event between agreeing countries. The Court reiterated that the purpose of a tax treaty is it is
used to reconcile the national fiscal legislations of the contracting parties in order to help the taxpayer
avoid international juridical double taxation. Double taxation is the imposition of comparable taxes in two
or more states on the same taxpayer in respect of the same subject matter and for identical periods
Thus the Court held that the BIR cannot impose additional requirements that would negate the availment
of relief provided under international agreements
Q. Are persons selling aviation fuel exempt from paying taxes for selling their fuel to international
air carriers?
A. Commissioner of Internal Revenue v. Pilipinas Shell Petroleum Corporation, G.R. No. 188497.
February 19, 2014: Under the basic international law principle of pactasuntservanda, the state has the
duty to fulfill its treaty obligations in good faith. This entails harmonization of national legislation with
treaty provisions. Section 135 (a) of the National Internal Revenue Code embodies the countrys
compliance with its undertakings under the 1944 Chicago Convention on International Aviation (Chicago
Convention), Article 24 (9) of which has been interpreted to prohibit taxation of aircraft fuel consumed
for international transport, and various bilateral air service agreements not to impose excise tax on
aviation fuel purchased by international carriers from domestic manufacturers or suppliers on petroleum
products sold to tax-exempt international carriers. Evidently, construction of the tax exemption provision
in question should give primary consideration to its broad implications on the countrys commitment
under international agreements. In view of the foregoing the Court held that respondent, as the statutory
taxpayer who is directly liable to pay the excise tax on its petroleum products is entitled to a refund or
credit of the excise taxes it paid for petroleum products sold to international carriers, the latter having
been granted exemption from the payment of said excise tax under Section 135 (a) of the NIRC
II. National Internal Revenue Code
Q. What is income?
A. Income consists of profit or gains as to the amount of money coming to a person or corporation over a
specified period of time.
Income: definition, nature, tests when it becomes taxable; inclusions of gross income, classification as to
source (compensation income, fringe benefits, professional income, income from business, income from
dealings in property; passive income investment (ex. Final tax of 20% on interest income, royalty income
except on royalty on books which is subject to 10%, yield on monetary benefit from deposit substitutes,
prizes or awards except PCSO and Lotto winnings);10% final tax on royalties on literary works, books
and musical compositions (LBM); 10% on from winnings from horse races; 10% on cash and stock
dividends for Filipinos, annuities, proceeds from insurance policies, prizes and awards, pensions,
retirement benefit or separation pay; income from whatever source (ex. forgiveness of indebtedness, tax
refund); capital gains tax expect a question on this review Sec. 24(D) of the NIRC for schedule of rate
and for actual computation of final sale over a property transaction); Tax rates for non-resident aliens
are higher. Check relevant provisions.
Q.What are the elements of income?
A. Presence of gain or profit, such is realized actually or constructively; and is not exempt by any law or
treaty.
Q. What is taxable income?
A. Items earned or gained as gross income less deductions and/ or personal and additional exemptions, if
authorized under the NIRC or any special law; distinguish between ordinary income and ordinary loss.
Q. Who are liable to pay income tax?
Resident citizens with minimum wage earners considered as special class; non -resident citizens
(Overseas contract workers, seafarers); aliens (determine threshold as to amount and period), domestic
corporations (review principles on transfer pricing); foreign corporations (review profit sharing for
branches) including resident and non-resident foreign corporations, partnerships including general
partnerships, co-ownerships and estates and trusts.
Q. What is included in income tax?
A. Income tax, estate and donors taxes, value-added tax, other percentage taxes, excise taxes;
documentary stamp taxes; and such other taxes as are or hereafter may be imposed and collected by the
BIR.
Q. What is the nature of capital gains tax?
A. REPUBLIC OF THE PHAILIPPINES, REPRESENTED BY THE DEPARTMENT OF PUBLIC
WORKS AND HIGHWAYS vs. ARLENE R. SORIANO, G.R No. 211666, February 25, 2015: Capital
gains is a tax on passive income, it is the seller, not the buyer, who generally would shoulder the tax. As a
general rule, therefore, any of the parties to a transaction shall be liable for the full amount of the
documentary stamp tax due, unless they agree among themselves on who shall be liable for the same.
Q. What are included when a natural person is taxed?
A. Inclusions in compensation income, exclusions and deductions (itemized and standard deductions.
Memorize the amounts on personal exemption for individual tax payer under Section 35 (A) of the
NIRC.); Income derived from business or practice of profession; treatment of passive income (final tax
and need not be reported since deduction is in the form of final tax); tax on capital gains; senior citizens,
minimum wage earners and those who granted exemptions under international agreements (those
employed with Asian Development Bank and IRRI) are exempt from payment.
Q. What are included when domestic corporations are taxed?
A. Covered transactions, payment schedule, allowable deductions (itemized and optional standard
deductions); treatment of passive incomes subject to tax and those not subject to tax; tax on capital gains;
check also on principle of transfer pricing if domestic corporation does business in another foreign
country; treatment of accumulated earnings.
Section 27(B) of the NIRC imposes a 10% preferential tax rate on the income of (1) proprietary nonprofit educational institutions and (2) proprietary non-profit hospitals. The only qualifications for
hospitals are that they must be proprietary and non-profit. "Proprietary" means private, following the
definition of a "proprietary educational institution" as "any private school maintained and
administered by private individuals or groups" with a government permit. "Non-profit" means no net
income or asset accrues to or benefits any member or specific person, with all the net income or asset
devoted to the institution's purposes and all its activities conducted not for profit.
Q. What taxes are imposed on an educational institution?
A. Angeles University Foundation v. City of Angles, 2012. Only portions actually, directly and
exclusively used for charitable purposes are exempt from real property taxes; while portions leased to
private entities are not exempt from such taxes.
Q. What taxes are imposed on a hospital: CIR v.St. Lukes Medical Center, 2012:
A. As a general principle, a charitable institution does not lose its character as such and its exemption
from taxes simply because it derives income from paying patients, whether out-patient, or confined in the
hospital, or receives subsidies from the government, so long as the money received is devoted or used
altogether to the charitable object which it is intended to achieve; and no money inures to the private
benefit of the persons managing or operating the institution.
Q. What taxes are imposed on resident foreign corporations?
A. General rule foreign corporations are liable for income derived from Philippine sources; may enjoy
certain incentives if covered by a treaty or special provision of law (registration under the Board of
Investments and the Philippine Economic Zone Authority); minimum corporate tax due and schedule of
payment; treatment of other incomes; liability for capital gains tax; treatment of accumulated earnings
Tax for services rendered by a resident corporation outside Philippine territory: Accenture, Inc. v.
CIR, 2012: The Court held that that the recipient of the service should be doing business outside the
Philippines to qualify for zero-rating is the only logical interpretation of Section 102(b) (2) of the 1977
Tax Code, as we explained in Burmeister: This can only be the logical interpretation of Section 102 (b)
(2). If the provider and recipient of the "other services" are both doing business in the Philippines, the
payment of foreign currency is irrelevant. Otherwise, those subject to the regular VAT under Section 102
(a) can avoid paying the VAT by simply stipulating payment in foreign currency inwardly remitted by the
recipient of services. To interpret Section 102 (b) (2) to apply to a payer-recipient of services doing
business in the Philippines is to make the payment of the regular VAT under Section 102 (a) dependent on
the generosity of the taxpayer. The provider of services can choose to pay the regular VAT or avoid it by
stipulating payment in foreign currency inwardly remitted by the payer-recipient. Such interpretation
removes Section 102 (a) as a tax measure in the Tax Code, an interpretation this Court cannot sanction. A
tax is a mandatory exaction, not a voluntary contribution. x xx
Further, when the provider and recipient of services are both doing business in the Philippines, their
transaction falls squarely under Section 102 (a) governing domestic sale or exchange of services. Indeed,
this is a purely local sale or exchange of services subject to the regular VAT, unless of course the
transaction falls under the other provisions of Section 102 (b).
Q. What taxes are imposed on non-resident foreign corporations?
A. Non-resident foreign corporations are liable only for income derived from Philippine sources, rate and
schedule of payment, tax liability on certain incomes like interest on foreign loans, intra corporate
dividends; may enjoy certain exemptions under tax treaty or provision of special laws; treatment of
accumulated earnings
Estate Tax and Donors Taxes under the NIRC
Q. How do you determine the value of estate to be taxed?
A. Only the net value of the estate is liable to tax. A schedule of brackets of amount of net value and the
corresponding rate schedule per bracket are imposed.
Q. Who are liable to pay estate taxes?
A. Residents and citizens covering all properties, real or personal, tangible or intangible, wherever
situated; and non-resident aliens covering only properties in the Philippines provided, that, with respect to
intangible personal property, its inclusion in the gross estate is subject to the rule on reciprocity.
Q. What is gross estate?
A. Decedents interest at the time of his death, transfer in contemplation of death, property transfers
subject to revocation, property passing under a general power of appointment, proceeds of life insurance;
and property transfers for insufficient consideration
Q. What may be deducted from the estate?
A. The following may be deducted from the estate:
1. Expenses, losses, indebtedness and taxes (funeral expenses, judicial expenses, claims against the estate,
claims against insolvent persons, unpaid mortgages, taxes and casualty losses); and
2. Property previously taxed (transfers for public use, family home, standard deduction, medical
expenses and amounts received by heirs under R.A. 4917 on Retirement Benefits of Private Employee).
Please review the concept of vanishing deduction and the corresponding holding period and the tax rate
based on the value of the property under Section 86(A) (2) of the NIRC.
Q. Who are considered strangers for purposes of donors tax?
A. Read on definition, transactions covered and schedule of payment based on brackets as to the value of
the donation (Section 16 of the NIRC); for the stranger, a flat rate of 30% is imposed; the following are
NOT strangers- brother, sister (whether by whole or half blood), spouse, ancestor and lineal descendant;
and relative by consanguinity in the collateral line within the fourth civil degree of relationship.
Q. What items are not subject to donors tax?
A. Dowries or gifts made on account of marriage, gifts made or for use of the national government or
entity created by any of its agencies which is not conducted for profit, or to any political subdivision of
said government; and gifts in favor of an educational and/or charitable, religious, cultural or social
welfare corporation, institution, accredited non- governmental organization, trust or philanthropic
organization or research institution or organization.
Q. What are the rules on protest and refund for income tax?
A. A taxpayer may protest any assessment administratively; taxes may be paid under protest.
General Rule: Refund may be requested by the taxpayer within two years from payment.
Commissioner of Internal Revenue v. Team (Philippines) Operations Corporation (formerly Mirant
Phils., Operation Corporation), G.R. No. 179260 (2014: There are three essential conditions for the
grant of a claim for refund of creditable withholding income tax, to wit:
(1) The claim is filed with the Commissioner of Internal Revenue within the two-year period from the
date of payment of the tax;
(2) It is shown on the return of the recipient that the income payment received was declared as part of the
gross income; and
(3) The fact of withholding is established by a copy of a statement duly issued by the payor to the payee
showing the amount paid and the amount of the tax withheld therefrom.
Q. What may the government resort to in case of tax payer delinquency?
A. Distraint of personal property, levy of real property; civil action and criminal action.
expanded to include not only civil tax cases but also cases that are criminal in nature, as well as local
tax cases, property taxes and final collection of taxes.
Q. What cases are within the jurisdiction of the Court of Tax Appeals?
A. Pursuant to the provisions of Republic Act No. 1125 and other laws prior to R.A. 9282, the Court of
Tax Appeals retains exclusive appellate jurisdiction to review by appeal, the following:
1
Decisions of the Commissioner of Customs in cases involving liability for customs duties, fees or
other money charges; seizure, detention or release of property affected; fines, forfeitures or other
penalties imposed in relation thereto; or other matters arising under the Customs Law or other law
or part of law administered by the Bureau of Customs [Rep. Act. No. 1125, (1954), Sec. 7];
In automatic review cases where such decisions of the Commission of Customs favorable to the
taxpayer is elevated to the Secretary of Finance (Sec. 2315, TCC); and
Decisions of the Secretary of Trade and Industry, in the case of non-agricultural product,
commodity or article, or the Secretary of Agriculture, in the case of agricultural product,
commodity or article, in connection with the imposition of the Anti-Dumping Duty,
Countervailing and Safeguard Duty [Republic Act Nos. 8751 and 8752, (1999) Sec. 301 (a) and
(p), and Republic Act 8800].
Under Republic Act Number 9282, the CTA's original appellate jurisdiction was expanded to include the
following:
1
Criminal cases involving violations of the National Internal Revenue Code and the Tariff and
Customs Code;
Decisions of the Central Board of Assessment Appeals (CBAA) in cases involving the assessment
and taxation of real property; and
Collection of internal revenue taxes and customs duties the assessment of which have already
become final.
Q. Will a case for tax evasion fail without a deficiency tax assessment?
A. No. BUREAU OF INTERNAL REVENUE, as represented by the COMMISSIONER OF
INTERNAL REVENUE vs. COURT OF APPEALS, SPOUSES ANTONIO VILLAN MANLY, and
RUBY ONG MANLY, G.R No. 197590, November 24, 2014: The Court ruled that tax evasion is deemed
complete when the violator has knowingly and willfully field a fraudulent return with intent to evade and
defeat a part of all of the tax. Corollarily, an assessment of the tax deficiency is not required in a criminal
prosecution for tax evasion. However, in Commissioner of Internal Revenue v. Court of Appeals, the
Court clarified that although a deficiency assessment is not necessary, the fact that a tax is due must first
be proved before one can be prosecuted for tax evasion.
SAMAR-I ELECTRIC COOPERATIVE vs. COMMISSIONER OF INTERNAL REVENUE, G.R No.
193100, December 10, 2014: The Court held that the notice requirement under section 228 of the NIRC
is substantially complied with whenever the taxpayer had been fully informed in writing of the factual
and legal bases of the deficiency taxes assessment, which enabled the latter to file an effective protest.
Q. Is a deficiency VAT assessment tantamount to an assessment for withholding tax liabilities such
that the taxpayer cannot avail of a tax amnesty program?
A. No. Indirect taxes, like VAT and excise tax, are different from withholding taxes. To distinguish, in
indirect taxes, the incidence of taxation falls on one person but the burden thereof can be shifted or passed
on to another person, such as when the tax is imposed upon goods before reaching the consumer who
ultimately pays for it. On the other hand, in case of withholding taxes, the incidence and burden of
taxation fall on the same entity, the statutory taxpayer. The burden of taxation is not shifted to the
withholding agent who merely collects, by withholding, the tax due from income payments to entities
arising from certain transactions and remits the same to the government.
Q. What are the requirements for entitlement of a corporate taxpayer for a refund or the issuance
of tax credit certificate involving excess withholding taxes?
A. REPUBLIC OF THE PHILIPPINES, REPRESENTED BY THE COMMISSIONER OF
INTERNAL REVENUE vs. TEAM (PHILS.) ENERGY CORPORATION (FORMERLY MIRANT
PHILS ENERGY CORPORATION), G.R. No. 188016, January 14, 2015: The Court held that the
following requisites must be complied with to sustain the claim for refund:
1) That the claim for refund was filed within the two-year reglementary period pursuant to Sec. 229
of the NIRC;
2) When it is shown on the ITR that the income payment received is being declared part of the tax
payers gross income; and
3) When the fact of withholding is established by a copy of the withholding tax statement, duly issued
by the payor to the payee, showing the amount paid and income tax withheld from that account
Q. Is the CTA prohibited from determining whether taxes should have been paid because it is an
assessment?
A. No. SMI-ED PHILIPPINES TECHNOLOGY, INC. vs. COMMISSIONER OF INTERNAL
REVENUE, G.R. No. 175410, November 12, 2014: The Supreme Court ruled that in an action for the
refund of taxes allegedly erroneously paid, the Court of Tax Appeals may determine whether there are
taxes that should have been paid is not assessment. It is incidental to determining whether there should be
a refund.
THE PHILIPPINE AMERICAN LIFE AND GENERAL INSURANCE COMPANY vs. SECRETARY
OF FINANCE and COMMISSIONER OF INTERNAL REVENUE, G.R No. 210987, November 24,
2014: The Court ruled that, the CTA can now rule not only on the propriety of an assessment or tax
treatment of a certain transaction, but also on the validity of the revenue regulation or revenue
memorandum circular on which the said assessment is based.
the assessors authority to assess and collect such taxes, but pertains to the reasonableness or correctness
of the assessment by the local assessor
Smart Communications, Inc. v. Municipality of Malvar, Batangas, G.R. No. 20442. February 18,
2014. Section 5, Article X of the 1987 Constitution provides that [e]ach local government unit shall
have the power to create its own sources of revenues and to levy taxes, fees, and charges subject to such
guidelines and limitations as the Congress may provide, consistent with the basic policy of local
autonomy. The LGC defines the term charges as referring to pecuniary liability, as rents or fees against
persons or property, while the term fee means a charge fixed by law or ordinance for the regulation or
inspection of a business or activity. The effect is merely incidental. Thus, the fees imposed in Ordinance
No. 18 are not taxes. Considering that the fees in Ordinance No. 18 are not in the nature of local taxes,
and petitioner is questioning the constitutionality of the same, the CTA correctly dismissed the petition for
lack of jurisdiction.
City of Manila, Hon. Alfredo S. Lim, as Mayor of the City of Manila, et al. vs. Hon. Angel Valera
Colet, as Presiding judge, Regional Trial Court of Manila (Br.43), et al. G.R No. 120051, December 10,
2014: The power to tax of local government units is a delegated power and must be exercised within the
guidelines and limitations that Congress may provide. taxing power of local government units.
V. Tariff and Customs Code of 1978, as amended
A. IMPORT DUTIES
Q. What are ordinary import duties?
A. Tariff duties are levied on imported goods either as a revenue generating measure or a protective
scheme to artificially or temporarily inflate prices to protect a countrys domestic output and its industries
from their foreign counterparts. With the exception of certain articles which can be imported duty-free,
upon compliance with certain prescribed conditions or formalities, goods are levied ordinary import
duties under the Most Favored Nation (MFN) treatment,ranging from Free/Zero to 30% except in cases of
sensitive agricultural products which are accorded a certain degree of protection via higher tariff rates
reaching to as high as 65%. On the other hand, under the Common Effective Preferential Tariff (CEPT)
Scheme, goods are levied ordinary import duties ranging from 0% to 5%, except also in cases of sensitive
agricultural products which are subject to as high as 40% tariff duties.
imported into the Philippines in accordance with Section 303 of the TCCP. In case of failure to mark an
article or its container at the time of importation, there shall be levied upon such article a marking duty
of 5% ad valorem.
d. Discriminatory Duty: The discriminatory duty is imposed by the President by proclamation upon
articles of a foreign country which discriminate against Philippine commerce or against goods
coming from the Philippines as stipulated under Section 304 of the TCCP. The amount of additional
duty to be levied shall not exceed 100% ad valorem based on the dutiable value of imported articles.
e. General Safeguard Measure: The general safeguard measure is applied by the Secretary of Trade and
Industry, in the case of non-agricultural products, or the Secretary of Agriculture, in the case of
agricultural products, upon positive final determination of the Tariff Commission that a product is being
imported into the country in increased quantities, whether absolute or relative to domestic production, as
to cause or threaten to cause serious injury to the domestic industry. In the case of non-agricultural
products, however, the Secretary of Trade and Industry shall first establish that the application of such
safeguard measures will be in the course of public interest.
The general safeguard measure shall be limited to the extent of redressing or preventing the injury and to
facilitate adjustments by the domestic industry from the adverse effects directly attributed to the increased
imports.
f.Special Safeguard Duty: An additional special safeguard duty is imposed on an agricultural product
whenever the cumulative import volume in a given year exceeds its trigger volume and when the
actual c.i.f. (Cost, Insurance and Freight) import price falls below its trigger price. The safeguard
duty is imposed by the Commissioner of Customs through the Secretary of Finance upon request by the
Secretary of Agriculture.
B. EXPORT DUTIES
Q. What domestic items remain subject to export duties?
A. Logs are the only remaining products subject to the duty under Section 514 of the TCCP, as amended.
The export duty imposed on logs is 20% of the gross Free on Board (FOB) value at the time of shipment
based on the prevailing rate of exchange. However, only planted trees are subject to the export duty,
since all naturally grown trees are banned from being exported under Ministry of Environment and
Natural Resources Memorandum Order No. 8 (issued June 20, 1986).
C. Remedies
1. The Commissioner of Customs has jurisdiction in cases involving liability for customs duties, fees or
other money charges; seizure, detention or release of property affected; fines, forfeitures or other penalties
imposed in relation thereto; or other matters arising under the Customs Law or other law or part of law
administered by the Bureau of Customs [Rep. Act. No. 1125, (1954), Sec. 7].
2. Decisions of the Commission of Customs favorable to the taxpayer are elevated to the Secretary of
Finance (Sec. 2315, TCC); and
3. The Secretary of Trade and Industry has jurisdiction in the case of non-agricultural product, commodity
or article, while the Secretary of Agriculture, in the case of agricultural product, commodity or article, in
connection with the imposition of the Anti-Dumping Duty, Countervailing and Safeguard Duty [Republic
Act Nos. 8751 and 8752, (1999) Sec. 301 (a) and (p), and Republic Act 8800].
4. Decisions/ Resolutions of the DTI and DA Secretaries may be elevated to the Tariff Commission.
5. Decisions of the Tariff Commission are appealable to the CTA.
6. CTA decisions are appealable to the Supreme Court.